IDEAS home Printed from
   My bibliography  Save this article

Strategic policy for product R&D with symmetric costs


  • Naoto Jinji


In this paper I examine strategic policy for product R&D in an international duopoly where domestic and foreign firms are identical. It is shown that strategic R&D policy is described by a subsidy schedule contingent on firms' quality choices. Unilateral policy enables its domestic firm to produce a high-quality product, making equilibrium outcome unique. With two active governments, in equilibrium they implement different subsidy schedules. Two equilibrium outcomes exist, which are identical except for the identity of the countries. Thus, both countries have an equal chance to become the high-quality exporter. Both Bertrand and Cournot cases are examined.

Suggested Citation

  • Naoto Jinji, 2003. "Strategic policy for product R&D with symmetric costs," Canadian Journal of Economics, Canadian Economics Association, vol. 36(4), pages 993-1006, November.
  • Handle: RePEc:cje:issued:v:36:y:2003:i:4:p:993-1006

    Download full text from publisher

    File URL:
    File Function: Full text
    Download Restriction: Available to subscribers only. Alternative access through JSTOR and Ingenta.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    1. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2000. "Sticky Price Models of the Business Cycle: Can the Contract Multiplier Solve the Persistence Problem?," Econometrica, Econometric Society, vol. 68(5), pages 1151-1180, September.
    2. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
    3. Jordi Gali, 1999. "Technology, Employment, and the Business Cycle: Do Technology Shocks Explain Aggregate Fluctuations?," American Economic Review, American Economic Association, vol. 89(1), pages 249-271, March.
    4. Cogley, Timothy & Nason, James M, 1995. "Output Dynamics in Real-Business-Cycle Models," American Economic Review, American Economic Association, vol. 85(3), pages 492-511, June.
    5. Ellison, Martin & Scott, Andrew, 2000. "Sticky prices and volatile output," Journal of Monetary Economics, Elsevier, vol. 46(3), pages 621-632, December.
    6. Marvin Goodfriend & Robert King, 1997. "The New Neoclassical Synthesis and the Role of Monetary Policy," NBER Chapters,in: NBER Macroeconomics Annual 1997, Volume 12, pages 231-296 National Bureau of Economic Research, Inc.
    7. Kim, Jinill, 2000. "Constructing and estimating a realistic optimizing model of monetary policy," Journal of Monetary Economics, Elsevier, vol. 45(2), pages 329-359, April.
    8. Laurence Ball & David Romer, 1990. "Real Rigidities and the Non-Neutrality of Money," Review of Economic Studies, Oxford University Press, vol. 57(2), pages 183-203.
    9. Hairault, Jean-Olivier & Portier, Franck, 1993. "Money, New-Keynesian macroeconomics and the business cycle," European Economic Review, Elsevier, vol. 37(8), pages 1533-1568, December.
    10. Ali Dib & Louis Phaneuf, 2001. "An Econometric U.S. Business Cycle Model with Nominal and Real Rigidities," Cahiers de recherche CREFE / CREFE Working Papers 137, CREFE, Université du Québec à Montréal.
    11. Matthew D. Shapiro, 1986. "The Dynamic Demand for Capital and Labor," The Quarterly Journal of Economics, Oxford University Press, vol. 101(3), pages 513-542.
    12. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    13. Blanchard, Olivier Jean & Kiyotaki, Nobuhiro, 1987. "Monopolistic Competition and the Effects of Aggregate Demand," American Economic Review, American Economic Association, vol. 77(4), pages 647-666, September.
    14. Kevin Huang & Z. Liu, "undated". "Staggered contracts and business cycle persistence," Working Papers 2000-08, Utah State University, Department of Economics.
    15. Paul R. Bergin & Robert C. Feenstra, "undated". "Staggered Price Setting And Endogenous Persistence," Department of Economics 98-05, California Davis - Department of Economics.
    16. Blanchard, Olivier Jean & Kahn, Charles M, 1980. "The Solution of Linear Difference Models under Rational Expectations," Econometrica, Econometric Society, vol. 48(5), pages 1305-1311, July.
    17. Michael T. Kiley, 1997. "Staggered price setting and real rigidities," Finance and Economics Discussion Series 1997-46, Board of Governors of the Federal Reserve System (U.S.).
    18. Lars Peter Hansen & Thomas J. Sargent, 1993. "Recursive linear models of dynamic economies," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
    19. Ireland, Peter N., 1997. "A small, structural, quarterly model for monetary policy evaluation," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 47(1), pages 83-108, December.
    20. Julio J. Rotemberg & Michael Woodford, 1993. "Dynamic General Equilibrium Models with Imperfectly Competitive Product Markets," NBER Working Papers 4502, National Bureau of Economic Research, Inc.
    21. Sargent, Thomas J, 1978. "Estimation of Dynamic Labor Demand Schedules under Rational Expectations," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 1009-1044, December.
    22. Burnside, Craig & Eichenbaum, Martin & Rebelo, Sergio, 1993. "Labor Hoarding and the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 245-273, April.
    23. Mendoza, Enrique G, 1991. "Real Business Cycles in a Small Open Economy," American Economic Review, American Economic Association, vol. 81(4), pages 797-818, September.
    24. Julio J. Rotemberg, 1982. "Monopolistic Price Adjustment and Aggregate Output," Review of Economic Studies, Oxford University Press, vol. 49(4), pages 517-531.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Mario Pezzino, 2010. "Minimum Quality Standards with More Than Two Firms Under Cournot Competition," The IUP Journal of Managerial Economics, IUP Publications, vol. 0(3), pages 26-45, August.
    2. Ghosh, Arghya & Saha, Souresh, 2015. "Price competition, technology licensing and strategic trade policy," Economic Modelling, Elsevier, vol. 46(C), pages 91-99.
    3. Stefan Lutz & Mario Pezzino, 2010. "Mixed oligopoly, vertical product differentiation and fixed qualitydependent costs," The School of Economics Discussion Paper Series 1015, Economics, The University of Manchester.
    4. Stefan Lutz & Mina Baliamoune-Lutz, 2003. "Mutual Recognition of National Minimum Quality Standards may Support International Convergence," Journal of Industry, Competition and Trade, Springer, vol. 3(4), pages 293-311, December.
    5. Jan Kranich, 2008. "R&D and the agglomeration of industries," Working Paper Series in Economics 83, University of Lüneburg, Institute of Economics.
    6. Hodaka Morita & Xuan Nguyen, 2012. "FDI and Technology Spillovers under Vertical Product Di erentiation," Discussion Papers 2012-19, School of Economics, The University of New South Wales.
    7. Naoto Jinji & Tsuyoshi Toshimitsu, 2010. "Strategic R&D Policy in a Quality-Differentiated Industry with More than Two Exporting Countries," Discussion papers e-09-001, Graduate School of Economics Project Center, Kyoto University.
    8. Jinji, Naoto & Toshimitsu, Tsuyoshi, 2013. "Strategic R&D policy in a quality-differentiated industry with three exporting countries," Japan and the World Economy, Elsevier, vol. 28(C), pages 132-142.
    9. Taba Yumiko, 2016. "Optimal Product R&D Policies with Endogenous Quality Choices and Unilateral Spillover," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 16(1), pages 365-391, January.
    10. Julien Berthoumieu & Viola Lamani, 2016. "Vertical Differentiation, Uncertainty, Product R&D and Policy Instruments in a North-South Duopoly," Working Papers hal-01285559, HAL.

    More about this item

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cje:issued:v:36:y:2003:i:4:p:993-1006. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Prof. Werner Antweiler). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.